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Electricity transmission cost allocation and network efficiency: Implications for Mexico's liberalized power market

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  • Bushnell, James
  • Ibarra-Yúnez, Alejandro
  • Pappas, Nicholas

Abstract

In liberalized electricity markets, the coordination and funding of transmission infrastructure are ongoing challenges. The challenge is to establish transmission tariffs that provide signals for efficient usage of the existing network and demand for new network capacity. Mexico's liberalized electricity market exemplifies the changing responsibilities in transmission planning. Through the adoption of locational marginal pricing, the Mexican market is well positioned to capture congestion costs and motivate efficient behavior. We highlight some of the potential problems that Mexico's currently planned approach and transmission tariffs could raise for generation location incentives. A long-term transmission plan can facilitate network optimization, with generation following the lead of transmission investment instead of the other way around.

Suggested Citation

  • Bushnell, James & Ibarra-Yúnez, Alejandro & Pappas, Nicholas, 2019. "Electricity transmission cost allocation and network efficiency: Implications for Mexico's liberalized power market," Utilities Policy, Elsevier, vol. 59(C), pages 1-1.
    • Handle: RePEc:eee:juipol:v:59:y:2019:i:c:12
    DOI: 10.1016/j.jup.2019.100932
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    References listed on IDEAS

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    1. Paul Joskow & Jean Tirole, 2005. "Merchant Transmission Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 233-264, June.
    2. Rosellón, Juan & Myslíková, Zdenka & Zenón, Eric, 2011. "Incentives for transmission investment in the PJM electricity market: FTRs or regulation (or both?)," Utilities Policy, Elsevier, vol. 19(1), pages 3-13, January.
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    5. Vogelsang, Ingo, 2001. "Price Regulation for Independent Transmission Companies," Journal of Regulatory Economics, Springer, vol. 20(2), pages 141-165, September.
    6. Schill, Wolf-Peter & Egerer, Jonas & Rosellón, Juan, 2015. "Testing Regulatory Regimes for Power Transmission Expansion with Fluctuating Demand and Wind Generation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 47(1), pages 1-28.
    7. Joskow, Paul L., 2005. "Transmission policy in the United States," Utilities Policy, Elsevier, vol. 13(2), pages 95-115, June.
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    Cited by:

    1. Gómez-Gardars, Emanuel Birkir & Rodríguez-Macias, Antonio & Tena-García, Jorge Luis & Fuentes-Cortés, Luis Fabián, 2022. "Assessment of the water–energy–carbon nexus in energy systems: A multi-objective approach," Applied Energy, Elsevier, vol. 305(C).
    2. Castellanos-Sosa, Francisco A. & Cabral, René & Mollick, André Varella, 2022. "Energy reform and energy consumption convergence in Mexico: A spatial approach," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 336-350.

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    More about this item

    Keywords

    Transmission tariffs; Network efficiency; Mexico electricity market;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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